Opening the meeting, the presiding chair, Senator McGaha,
asked Mr. Keith Rogers and Mr. Brian Furnish, executive director and deputy
director respectively of the Governorís Office of Agricultural Policy (GOAP),
to present their monthly report of state and county projects reviewed at the
previous Agricultural Development Board (ADB) meeting.

Mr. Rogers reviewed the model program list, noting that
funding was down for the reporting period, but would be higher in May based on
new tobacco settlement funding that would be available.

As Mr. Rogers reviewed regular state projects, Chairman
McGaha posed a question about the Central Kentucky Agritourism Association,
which received $10,000 in tobacco funds to market and promote agritourism in
central Kentucky. The senator asked if it would not be more cost-effective for
such entities to operate under a larger group.

In response, Mr. Rogers said they had found the best
marketing approach was at a regional level, with emphasis placed on attractions
in that particular region.

Later, responding to a question from Representative McKee
about quantifying the associationís impact in fostering agritourism business,
Mr. Rogers said a requirement of the grant would be to assess the impact. He
noted an ďexplosionĒ in agritourism business in the state, but suggested that
agritourism may be profitable for some, but not others.

Mr. Rogers then summarized the Maple Hill Manor project to
construct an agritourism fiber education and marketing center, with forgiveness
on a $50,000 loan to be predicated on buying Kentucky products. The project
description listed fiber from alpacas, llamas, and sheep. In response to
Senator McGaha about how a two-year amortization grace period would work, Mr.
Rogers responded they would still be given credit of 75 cents forgiven for
every dollar value purchased of Kentucky products.

Responding to Senator Boswell, Mr. Rogers said he had not
idea of the size of the animal fiber market, although about 60 alpaca farms
were identified.

Mr. Rogers then reviewed the Scott County Beef Improvement
Association project to use $100,000 in Scott County funds to run a cost-share
program for former tobacco tenant farmers wishing to pursue other farming
endeavors. He said the Agricultural Development Board approved the funding as a
pilot project. Addressing a question from Chairman McGaha, he said they
included Bluegrass extension district counties within the scope of the
endeavor, although multicounty projects usually include the host county and
surrounding counties.

Chairman McGaha also questioned the rationale of† $50,000
funding for the next project on the list, Elk Creek Vineyards. The witnesses
explained that University of Kentucky experts had said that wine grape
production needed to be enhanced in the state. They said the funding to Elk Creek
mainly would go toward food preparation and serving.

Mr. Rogers and Mr. Furnish took some additional time
explaining an Agricultural Development Board commitment of $2 million to the
Kentucky Agricultural Finance Corporation (KAFC) to establish a beginning
farmer loan program for those involved in production agriculture. The ADB also
is expected to consider granting the KAFC an additional $3 million to develop a
loan program that complements existing loan opportunities available through the
Farm Service Agency, banks or other lenders.

Representative McKee expressed his optimism about the
beginning farmer loan program. He said the average age of farmers today is
rising. According to Mr. Rogers, a 2 percent loan rate for tobacco dependent
borrowers would be very attractive.

Senator Pendleton also asked for clarification on a project
that was denied funding,† Carlisle County Conservation District, which had
sought $5,250 to administer a shade cloth cost-share program for dark tobacco.
Mr. Rogers said the denial was in keeping with previous board actions to not
allow tobacco settlement funds to be used in tobacco production.

Next, Representative Arnold referred to the passage of HB
669, required state agencies to purchase Kentucky-grown agricultural products
if the vendor could meet quality and pricing requirements. He said that, while
the Legislature had allotted millions to farmer diversification, there still
existed a need for markets. He commented on how requirements in the bill could
work. During the discussion, Mr. Rogers said he applauded the General Assembly
for passing the measure.

In the final agenda topic, the committee heard a report from
Ms. Teresa A. Barton, Executive Director of the Kentucky Agency for Substance
Abuse Policy (KY-ASAP), a division of the Office of Drug Control Policy.

During her discussion, Ms. Barton reviewed the status of the
KY-ASAP board and board meetings, gave a financial overview that included fund
balances, board expenditures, board payments through April 13, 2006, and the budget
for FY 2006-2008, local board accomplishments, staffing, and town hall
meetings.

According to Ms. Bartonís report, the KY-ASAP board was
fully constituted in early April 2006 through gubernatorial appointments. The
board planned to meet in mid-May after having not met since July 2005. Ms.
Barton told the committee that the board had not been meeting because some
terms had expired.

Even though the board was not meeting, the KY-ASAP central
office continued processing funding awards to local boards, according to Ms.
Barton.

During discussion of local board allocations, both Chairman
McGaha and Co-Chairman Belcher questioned the amounts being allotted to
administrative/personnel by county or regional KY-ASAP organizations. Ms.
Barton said they would be receptive to changing the terms of spending for
administration at the county or regional level.

Senator McGaha asked if they had ever assessed the
effectiveness of the programs being funded with tobacco money. According to Ms.
Barton, the KIP Survey, which has been administered in Kentucky for a number of
years by individual school districts through agreements with the Division of
Substance Abuse, had shown a drop in teen smoking. While they believe
anti-drinking and smoking curricula help, substance abuse prevention would be
difficult to quantify.

In subsequent discussion, the KY-ASAP director said local
communities write their applications for funding based on an understanding of
their local needs. The report included summaries of local board
accomplishments.

Ms. Barton also pointed to a listing of town hall meetings
coming up in the state to stress the dangers of underage drinking.

As the discussion ended, both co-chairs, Senator McGaha and
Representative Belcher, complimented Ms. Barton for the information contained
in her report.

Documents distributed during the meeting are available with
meeting materials in the LRC Library.